Captured source text (L5)
OFSI’s approach to licensing grounds
| Licensing Ground | OFSI’s approach |
|---|---|
| Basic needs | The legislation confirms that the ground is present to enable the basic needs of a designated person, or (in the case of an individual) any financial dependent family member of such a person, to be met. Expenditure to meet basic needs of an individual should be expenses which are necessary to ensure designated persons or financially dependent family members are not imperilled. In respect of a person other than an individual (e.g. an entity), the legislation confirms that basic needs includes: • payment of insurance premiums • payment of reasonable fees for the provision of property management services • payment of remuneration, allowances or pensions of employees • payment of tax • rent or mortgage payments • utility charges The list of basic needs detailed above is not exhaustive but is indicative of the type of basic needs intended to be caught. Therefore, expenditure to meet the basic needs of an entity should be expenses strictly necessary to ensure the continued existence of the designated entity. Basic needs licences do not necessarily enable a designated person to continue the lifestyle or business activities they had before they were designated. |
| Fees for the provision of legal services | Legal fees and disbursements must be reasonable. It is for the applicant to demonstrate to OFSI that the legal fees and disbursements are reasonable. In most cases, you can provide legal advice to or act for a designated person without an OFSI licence. However, you cannot receive any payment for that advice without first obtaining an OFSI licence. OFSI can only authorise payment of reasonable legal fees and disbursements in relation to the provision of legal services. You are strongly encouraged to apply for a licence in advance of providing substantive legal services so you have certainty as to the fees that will be recoverable whilst the designated person remains listed. In support of your application, you should: • provide an estimate of the anticipated fees and/or fees that have already been incurred • provide a breakdown of how the fees will be charged and/or have been charged • identify any disbursements, such as payments for counsel or expert witnesses OFSI considers that the Supreme Court Cost Guides or the sums that could be expected to be recouped if costs were awarded, provide a useful starting point for assessing the reasonableness of legal fees and disbursements. If you are seeking fees of a level in excess of those, you need to demonstrate why those increased fees are reasonable in the given case. Fees and disbursements must relate specifically to the provision of legal advice, involvement in litigation or in dispute resolution. |
| Routine maintenance of frozen funds and economic resources | The fees or service charges must be reasonable and result in the routine holding or maintenance of frozen funds or economic resources. The re-design, refurbishment or redevelopment in order to improve the value of a frozen economic resource is generally not covered, although each application will be considered on a case by case basis. |
| Extraordinary expenses | This must be extraordinary in nature (including, but not limited to, unexpected, unavoidable and/or non-recurring). It cannot be used where other licensing grounds are more suitable or as a way of avoiding the clear limitations of those other grounds. |
| Judicial decisions | For UN designated persons. This enables the use of frozen funds or economic resources subject of a judicial decision or lien which was established before the date of designation and enforceable in the UK. The use of the funds or economic resources must be to implement or satisfy in whole or in part the pre-existing judicial decision or lien. It cannot be for the direct or indirect benefit of a designated person. For non-UN designated persons only: •This enables payments to implement or satisfy, in whole or in part, a judicial decision or lien that is enforceable in the UK. •That decision or lien can have been made pre or post the date of a designation. •A designated person may make a payment to another designated person under this derogation. However if funds or economic resources are made available to a designated person under this derogation they must be frozen in a UK bank account or otherwise subject to the relevant asset freeze provisions and no other designated person can benefit from that. |
| Humanitarian assistance activity | This enables payments to facilitate: • any humanitarian activity • where applicable, any activity where its purposes are consistent with the objectives of UN Security Council Resolutions - these will be set out in the applicable Sanctions Act regulations Humanitarian assistance includes the work of international and non-governmental organisations carrying out relief activities for the benefit of the applicable civilian population, which may include the delivery of humanitarian aid or peace-building programmes. A licence may still be required even if this activity is using government funds. |
| Diplomatic missions | This enables anything to be done in order that the proper functions of a diplomatic mission or consular post or an international organisation enjoying immunities in accordance with international law, may be carried out. |
| Extraordinary situations | This must be extraordinary in nature (including, but not limited to, being unexpected, unavoidable and/or non-recurring). This applies to non-UN designated persons and enables anything to be done to deal with an extraordinary situation. This will enable a licence to be issued to deal with a situation which is extraordinary in nature but does not necessarily involve an expense. There is a high threshold for a situation to meet the standard of being extraordinary, and even where a situation may seem extraordinary to the parties concerned (i.e. outside their normal day to day business) it does not necessarily mean it will meet the threshold for this licensing ground. It cannot be used where other grounds are more suitable or as a way of avoiding the clear limitations of other licensing grounds/ purposes. |
| Prior obligations | The obligation must have arisen prior to the date of designation and cannot relate to trade provisions (specified in the regulations). In addition, it cannot result in funds or economic resources being made available (directly or indirectly) to another designated person. |
| Divestment | The licensing grounds give OFSI the authority to issue licences to enable UK entities as set out below. **Wholly (fully) divest funds and economic resources they own, hold or control located within Russia and/or enable the facilitation of another person (UK or non-UK) to fully divest funds and economic resources owned, held or controlled by that person located within Russia.** • Full divestment for the purposes of licensing requests under these grounds constitutes the transfer by a person or UK entity (‘A’) of funds and/or economic resources located in Russia (‘the Relevant Asset’), to either a DP or the Russian government, resulting in A having no remaining interests in the Relevant Asset. It does not mean that A is required to transfer all of the funds and/or economic resources they own, hold or control in Russia, but they do need to divest their entire interest in the Relevant Asset. • OFSI will not treat activity it considers to be business-as-usual as full divestment. This may include, but is not limited to, activity: which restructures A’s ownership of the Relevant Asset so that A still owns or controls it via a different entity which A owns or controls; or the object of which is to fulfil A’s contractual obligations, but which is not aimed at the full divestment of the Relevant Asset. **Partially divest funds and economic resources they own, hold or control located within Russia and/or enable the facilitation of another person (UK or non-UK) to partially divest funds and economic resources that person owns, holds or controls located within Russia** • Partial divestment for the purposes of licensing requests under these grounds is a situation where a person or UK entity (‘A’) has a decided to divest itself of particular funds and/or economic resources located in Russia (‘the Relevant Asset’) as opposed to all of its funds and/or economic resources located in Russia to either a DP or the Russian government but wishes to only divest itself of a proportion of the Relevant Asset instead of all of it. • The applicant must provide evidence to demonstrate that this is part of a strategy to ultimately fully divest the Relevant Asset being partially divested, or a sufficient explanation as to why that is not possible. • OFSI will not treat activity it considers to be business-as-usual as partial divestment. This may include, but is not limited to activity: that restructures A’s ownership of the Relevant Asset being partially divested so that A still owns or controls it via a different entity which A owns or controls; or the object of which is to fulfil A’s contractual obligations, but which is not aimed at the partial divestment of the Relevant Asset. In cases of both full and partial divestment, OFSI will be very unlikely to license any activity where there is evidence that there is a potential for assets to be used in support of Russia’s war effort. **Divest investors who are designated under the Russia Regulations (“DP”) or the Russian government and/or enable the facilitation of another person (UK or non-UK) to divest themselves of investors who are DPs or the Russian government.** • The applicant, where they are a UK entity, can acquire from a DP or the Russian Government an interest held in that UK entity by the designated person or the Russian Government if the sole consideration for the acquisition is a transfer of funds from the UK entity to the designated person or the Russian Government and: - such funds are credited to a frozen account; or - an account held by a non-UK credit or financial institution in a non UK country and the law of that country provides for relevant and appropriate prohibitions, exceptions and provisions for licences to be granted which correspond to those in the regulations. |
| Insolvency | This licensing ground permits OFSI to license various payments and other activity in relation to insolvency, restructuring and related proceedings, provided that any payments made directly or indirectly to a DP are credited to a frozen UK bank account. For the insolvency and restructuring proceedings specifically, these must also relate to an insolvent person. |
| Designated Money Service Businesses | This licensing ground permits OFSI to issue a licence to allow funds to be returned to non-designated persons from designated Money Service Businesses provided that: 1. The designated Money Service Business is registered in the UK for money laundering purposes as set out in regulation 54 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; 2. The recipient of the repayment is themselves not a designated person and no payments will be made to a designated person, whether directly or indirectly; 3. The original payment to the Money Service Business was made before the date that the registered Money Service Business became a designated person and the transaction did not contravene the asset freeze regulations in any other way; and 4. The payment would not be contrary to the interests of the prevention or detection of serious crime in the UK or elsewhere. Before issuing a licence, OFSI will consult law enforcement to ensure that the final condition has been satisfied. “Money Service Business” has the same meaning as it has in regulation 3 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. For this licensing purpose, “registered money service business” means a money service business included in a register provided for by regulation 54 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. You may find the following links useful for determining the registration status of a Money Service Business: [Check if a business is registered for money laundering supervision](https://www.gov.uk/guidance/money-laundering-regulations-supervised-business-register#check-if-a-business-is-registered) [Financial Services Register](https://www.fca.org.uk/firms/financial-services-register) |
Full captured verbatim text
| Licensing Ground | OFSI’s approach | |---|---| | Basic needs | The legislation confirms that the ground is present to enable the basic needs of a designated person, or (in the case of an individual) any financial dependent family member of such a person, to be met. Expenditure to meet basic needs of an individual should be expenses which are necessary to ensure designated persons or financially dependent family members are not imperilled. In respect of a person other than an individual (e.g. an entity), the legislation confirms that basic needs includes: • payment of insurance premiums • payment of reasonable fees for the provision of property management services • payment of remuneration, allowances or pensions of employees • payment of tax • rent or mortgage payments • utility charges The list of basic needs detailed above is not exhaustive but is indicative of the type of basic needs intended to be caught. Therefore, expenditure to meet the basic needs of an entity should be expenses strictly necessary to ensure the continued existence of the designated entity. Basic needs licences do not necessarily enable a designated person to continue the lifestyle or business activities they had before they were designated. | | Fees for the provision of legal services | Legal fees and disbursements must be reasonable. It is for the applicant to demonstrate to OFSI that the legal fees and disbursements are reasonable. In most cases, you can provide legal advice to or act for a designated person without an OFSI licence. However, you cannot receive any payment for that advice without first obtaining an OFSI licence. OFSI can only authorise payment of reasonable legal fees and disbursements in relation to the provision of legal services. You are strongly encouraged to apply for a licence in advance of providing substantive legal services so you have certainty as to the fees that will be recoverable whilst the designated person remains listed. In support of your application, you should: • provide an estimate of the anticipated fees and/or fees that have already been incurred • provide a breakdown of how the fees will be charged and/or have been charged • identify any disbursements, such as payments for counsel or expert witnesses OFSI considers that the Supreme Court Cost Guides or the sums that could be expected to be recouped if costs were awarded, provide a useful starting point for assessing the reasonableness of legal fees and disbursements. If you are seeking fees of a level in excess of those, you need to demonstrate why those increased fees are reasonable in the given case. Fees and disbursements must relate specifically to the provision of legal advice, involvement in litigation or in dispute resolution. | | Routine maintenance of frozen funds and economic resources | The fees or service charges must be reasonable and result in the routine holding or maintenance of frozen funds or economic resources. The re-design, refurbishment or redevelopment in order to improve the value of a frozen economic resource is generally not covered, although each application will be considered on a case by case basis. | | Extraordinary expenses | This must be extraordinary in nature (including, but not limited to, unexpected, unavoidable and/or non-recurring). It cannot be used where other licensing grounds are more suitable or as a way of avoiding the clear limitations of those other grounds. | | Judicial decisions | For UN designated persons. This enables the use of frozen funds or economic resources subject of a judicial decision or lien which was established before the date of designation and enforceable in the UK. The use of the funds or economic resources must be to implement or satisfy in whole or in part the pre-existing judicial decision or lien. It cannot be for the direct or indirect benefit of a designated person. For non-UN designated persons only: •This enables payments to implement or satisfy, in whole or in part, a judicial decision or lien that is enforceable in the UK. •That decision or lien can have been made pre or post the date of a designation. •A designated person may make a payment to another designated person under this derogation. However if funds or economic resources are made available to a designated person under this derogation they must be frozen in a UK bank account or otherwise subject to the relevant asset freeze provisions and no other designated person can benefit from that. | | Humanitarian assistance activity | This enables payments to facilitate: • any humanitarian activity • where applicable, any activity where its purposes are consistent with the objectives of UN Security Council Resolutions - these will be set out in the applicable Sanctions Act regulations Humanitarian assistance includes the work of international and non-governmental organisations carrying out relief activities for the benefit of the applicable civilian population, which may include the delivery of humanitarian aid or peace-building programmes. A licence may still be required even if this activity is using government funds. | | Diplomatic missions | This enables anything to be done in order that the proper functions of a diplomatic mission or consular post or an international organisation enjoying immunities in accordance with international law, may be carried out. | | Extraordinary situations | This must be extraordinary in nature (including, but not limited to, being unexpected, unavoidable and/or non-recurring). This applies to non-UN designated persons and enables anything to be done to deal with an extraordinary situation. This will enable a licence to be issued to deal with a situation which is extraordinary in nature but does not necessarily involve an expense. There is a high threshold for a situation to meet the standard of being extraordinary, and even where a situation may seem extraordinary to the parties concerned (i.e. outside their normal day to day business) it does not necessarily mean it will meet the threshold for this licensing ground. It cannot be used where other grounds are more suitable or as a way of avoiding the clear limitations of other licensing grounds/ purposes. | | Prior obligations | The obligation must have arisen prior to the date of designation and cannot relate to trade provisions (specified in the regulations). In addition, it cannot result in funds or economic resources being made available (directly or indirectly) to another designated person. | | Divestment | The licensing grounds give OFSI the authority to issue licences to enable UK entities as set out below. **Wholly (fully) divest funds and economic resources they own, hold or control located within Russia and/or enable the facilitation of another person (UK or non-UK) to fully divest funds and economic resources owned, held or controlled by that person located within Russia.** • Full divestment for the purposes of licensing requests under these grounds constitutes the transfer by a person or UK entity (‘A’) of funds and/or economic resources located in Russia (‘the Relevant Asset’), to either a DP or the Russian government, resulting in A having no remaining interests in the Relevant Asset. It does not mean that A is required to transfer all of the funds and/or economic resources they own, hold or control in Russia, but they do need to divest their entire interest in the Relevant Asset. • OFSI will not treat activity it considers to be business-as-usual as full divestment. This may include, but is not limited to, activity: which restructures A’s ownership of the Relevant Asset so that A still owns or controls it via a different entity which A owns or controls; or the object of which is to fulfil A’s contractual obligations, but which is not aimed at the full divestment of the Relevant Asset. **Partially divest funds and economic resources they own, hold or control located within Russia and/or enable the facilitation of another person (UK or non-UK) to partially divest funds and economic resources that person owns, holds or controls located within Russia** • Partial divestment for the purposes of licensing requests under these grounds is a situation where a person or UK entity (‘A’) has a decided to divest itself of particular funds and/or economic resources located in Russia (‘the Relevant Asset’) as opposed to all of its funds and/or economic resources located in Russia to either a DP or the Russian government but wishes to only divest itself of a proportion of the Relevant Asset instead of all of it. • The applicant must provide evidence to demonstrate that this is part of a strategy to ultimately fully divest the Relevant Asset being partially divested, or a sufficient explanation as to why that is not possible. • OFSI will not treat activity it considers to be business-as-usual as partial divestment. This may include, but is not limited to activity: that restructures A’s ownership of the Relevant Asset being partially divested so that A still owns or controls it via a different entity which A owns or controls; or the object of which is to fulfil A’s contractual obligations, but which is not aimed at the partial divestment of the Relevant Asset. In cases of both full and partial divestment, OFSI will be very unlikely to license any activity where there is evidence that there is a potential for assets to be used in support of Russia’s war effort. **Divest investors who are designated under the Russia Regulations (“DP”) or the Russian government and/or enable the facilitation of another person (UK or non-UK) to divest themselves of investors who are DPs or the Russian government.** • The applicant, where they are a UK entity, can acquire from a DP or the Russian Government an interest held in that UK entity by the designated person or the Russian Government if the sole consideration for the acquisition is a transfer of funds from the UK entity to the designated person or the Russian Government and: - such funds are credited to a frozen account; or - an account held by a non-UK credit or financial institution in a non UK country and the law of that country provides for relevant and appropriate prohibitions, exceptions and provisions for licences to be granted which correspond to those in the regulations. | | Insolvency | This licensing ground permits OFSI to license various payments and other activity in relation to insolvency, restructuring and related proceedings, provided that any payments made directly or indirectly to a DP are credited to a frozen UK bank account. For the insolvency and restructuring proceedings specifically, these must also relate to an insolvent person. | | Designated Money Service Businesses | This licensing ground permits OFSI to issue a licence to allow funds to be returned to non-designated persons from designated Money Service Businesses provided that: 1. The designated Money Service Business is registered in the UK for money laundering purposes as set out in regulation 54 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; 2. The recipient of the repayment is themselves not a designated person and no payments will be made to a designated person, whether directly or indirectly; 3. The original payment to the Money Service Business was made before the date that the registered Money Service Business became a designated person and the transaction did not contravene the asset freeze regulations in any other way; and 4. The payment would not be contrary to the interests of the prevention or detection of serious crime in the UK or elsewhere. Before issuing a licence, OFSI will consult law enforcement to ensure that the final condition has been satisfied. “Money Service Business” has the same meaning as it has in regulation 3 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. For this licensing purpose, “registered money service business” means a money service business included in a register provided for by regulation 54 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. You may find the following links useful for determining the registration status of a Money Service Business: [Check if a business is registered for money laundering supervision](https://www.gov.uk/guidance/money-laundering-regulations-supervised-business-register#check-if-a-business-is-registered) [Financial Services Register](https://www.fca.org.uk/firms/financial-services-register) |